My question is, how does the engine utilize this? Is it based on hard code and limited to gold only? Or will adding in numerical values for any item have the same effect? Is it limited to those values?

So could I add: Gold_050 a with new 50-stack nif and it work?

Or for instance, could take ingred_emerald_01 and make it:
ingred_emerald_01_001
ingred_emerald_01_005

Absolutely! Although given that it doesn't directly help support Morrowind, it probably won't get implemented until after 1.0. Still, having a request for it means that it's on people's radars and will get implemented at some point.